The fund is operated by Quadrangle Group, the New York-based firm run by Rattner, the former deputy chairman of Lazard.

Quadrangle launched the hedge fund in 2006, managing about $500m (€398.7bn) at its peak.

Run by Robert Donahue, it invests in publicly traded media and communications stocks and has lost about 25% year to date.

Rattner, who began his career as a New York Times reporter, holds a commanding presence in the media world.

Just this week, he played host to media elite at the exclusive two-day "FourSquare" media conference at New York's Plaza Hotel. Appearing at the confab were such entertainment moguls as News Corp. president Peter Chernin, Microsoft Corp. chief executive Steve Ballmer and IAC Chief Executive Barry Diller.

Quadrangle Equity Investors is the second hedge fund to disappear from Quadrangle's stable.

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The Monarch principals, all former colleagues of Mr. Rattner at Lazard, left Quadrangle because they wanted to run their own firm, according to people familiar with their thinking.

Other private-equity firms also have experienced trouble with hedge-fund offerings.

Buyout giant Carlyle Group was forced to close two hedge funds earlier this year due to poor results and Bain Capital has recently had performance issues with two hedge funds in its credit-investing business.

Rattner, who founded Quadrangle in 2000, has had success in other areas. His asset-management business received a big boost earlier this year when Rattner's friend, New York City Mayor Michael Bloomberg, chose Quadrangle to manage his multibillion-dollar fortune.

Quadrangle manages about $3 billion across two private-equity funds and has investments in a number of high-profile media properties, including Metro-Goldwyn-Mayer Studios and the publisher of Maxim magazine.

Last year, the firm hired Yahoo chief operating officer Dan Rosensweig to open a Silicon Valley office, which last month led a $35m investment in Mail.com.